Tribunal prohibits merger of steel drum makers Rheem and Greif

31st January 2019 By: Schalk Burger - Creamer Media Senior Contributing Editor

The Competition Tribunal on Thursday announced that it had prohibited the proposed merger between industrial packaging companies Rheem and Greif, in which Greif would have acquired a majority interest in Rheem.

International Greif and local Rheem are suppliers of industrial packaging products, including knock-down drums for export, large steel drums and steel pails. Rheem has manufacturing facilities in Prospecton, Alrode and Cape Town.

 Greif’s main production sites are in Vanderbijlpark and in Mobeni.

The Competition Commission, in June 2017, prohibited the proposed intermediate merger on the grounds that it would constitute a near monopoly in the market for the manufacture and supply of large steel drums.

The companies in July 2017 applied to the tribunal to reconsider the matter.

“The proposed merger was previously notified to the commission and prohibited in 2004. The basis for the commission’s prohibition in those circumstances are materially the same in the current matter.

“The commission found that it was likely that the merged entity would be able to unilaterally increase prices and remove an effective competitor from the market.”

The companies argued that the merger would not lead to a substantial lessening of competition and that there were alternative suppliers in the market. They also argued that any potential competition concern would be cured by the behavioural and/or structural remedies they had proposed.

The tribunal heard evidence from a number of witnesses, including experts, and engaged extensively with Greif and Rheem on whether a potential remedy could be found to address the commission’s concerns.

The proposed remedies were canvassed with various stakeholders in the market.

However, despite the different remedies proposed, no appropriate remedy was tendered that would cure the substantial lessening of competition that would arise as a result of the proposed transaction.

The tribunal, therefore, prohibited the proposed merger.